Write both your calculations and reasoning clearly.( round percentage to one decimal point. Round currency to dollars and cents)
Net-4-you is an internet service provider that charges its 1 million customers $28.95 per month for its service. The company’s variable costs are $0.50 per customer per month. In addition,the company spends $0.75 per month per customers. As a result,the company’s monthly customer retention rate was 82.2 percent. Net-4-you has a monthly discount rate of 4 percent.
a) what is the costumer lifetime value for Net-4-you?
b) suppose the company wanted to increase its customers Monthly retention rate and decide to spend an additional 25 cents per months per customer to upgrade it loyalty program benefits. By how much must net-4-you increase its monthly customer retention rate so as not to reduce customer lifetime value resulting from a lower customer margin?